Citizens insurance depopulation
Question: How is cleaning out your closet like Citizens Insurance? Answer: They both make room for new stuff with higher prices.
With the official start of Florida's hurricane season two days away, Citizens Insurance is on a mission to depopulate its insurance rolls. Without applying to state regulators for rate increases, the state run Citizens is increasing premiums for Florida homeowners through a home re-inspection effort. Citizen's ultimate goal is to move as many as 678,000 policyholders out of the state run agency and try to become what their original mandate was – insurer of last resort.
Citizens is conducting 209,000 inspections this year to verify that hurricane discounts were properly awarded resulting in an average premium increase of $600 for homeowners who may no longer qualify for the discount. In addition to the re-inspections, coverage for carports, screened enclosures and fences will end for renewal policies. Also personal liability coverage limits will be decreased from $300,000 to $100,000.
The reason Citizens is attempting to depopulate its insurance rolls is that its premiums have been artificially low which is discouraging private insurers from entering the Florida market. In addition, its aggressive plan is also an attempt to protect all Florida policyholders in the event of a major storm. Citizens has the ability to levy assessments on almost all Florida policyholders to make up a potential financial shortfall.
Another part of Citizens' attempt to increase its revenue bottom line is to increase rates on policies an average of 55 percent in coastal areas and 19 percent in inland areas for homeowners who buy coverage for the first time after Jan. 1. This is an attempt to get around the 10 percent cap on rate increases put into place by the Florida Legislature in 2009.
Citizen's position is that the 2009 legislation specifically addresses increases to existing policies and does not provide the same cap advantage to new customers. Whether or not Citizens goes through with uncapping premiums will be decided at its next board of governors meeting at the end of July.
With the combination of property re-inspections and removal of caps for new policyholders Citizens is hoping to shrink its policies by 45 percent. According to Citizens, its long term goal is return policies to the private market, reducing the reliance on assessments to all Florida residents in the event of a major hurricane. Citizens has 1.4 million policyholders at this time, the majority of whom are located in south Florida and the Tampa Bay area.
The question is what would you do if you were on the board of Citizens Insurance or if you were a Florida lawmaker responsible for the welfare of all citizens in the state? Everyone reading this column lives on the coast and is already experiencing high insurance rates. Is that the price we have to pay for our gorgeous views and water access? I wish I knew the fair and appropriate answer.
One thing I do know is how happy I am not to have to make any of the decisions burdening lawmakers. I'm content to stay home depopulating my closet and hoping the hurricane cone stays away from my side of Florida.